Privacy Report: FTC Takes Action Against Companies Falsely Claiming Compliance With International Privacy Agreements

Headlines that matter for privacy and data security.

Federal US News

FTC Takes Action Against Companies Falsely Claiming Compliance With International Privacy Agreements

The FTC reached a settlement with a background screening company over allegations it falsely claimed to be a participant in the EU-US Privacy Shield program. In its complaint, the FTC alleges that SecurTest, Inc., falsely claimed on its website that it participated in the EU-US Privacy Shield and Swiss-US Privacy Shield frameworks. While the company initiated a Privacy Shield application in September 2017, it did not complete the steps necessary to be certified as complying with the frameworks, thus falsely representing that it was a certified participant on its website. In separate actions, the FTC also sent warning letters to more than a dozen companies for falsely claiming participation in other international privacy agreements—13 companies that falsely claimed participating in the old US-EU and US-Swiss Safe Harbor frameworks and 2 companies that claimed they were participants in the Asia-Pacific Economic Cooperation Cross-Border Privacy Rules. The FTC’s letter instructed the companies to remove from their websites, privacy policies, or any other public documents or statements that might be construed as claiming participation or involvement in these programs unless they prove that they have undergone the requisite review and certification. The FTC warned it would take appropriate legal action if the companies fail to provide a timely and satisfactory response.

Data Security Settlement With Service Provider Includes Updated Order Provisions

The FTC settled charges against DealerBuilt, a third-party service provider that sells software for auto dealers, with a proposed order that includes new provisions reflecting the current Commission’s priority of updating its data security orders. DealerBuilt had a number of security failures: no access controls, no written information security policy, no security training for employees or contractors, no periodic risk assessments, etc. To add insult to injury, a DealerBuilt employee bought a storage device and installed it on the company’s network in April 2015 to increase available backup storage. The device created an open connection port that allowed transfers of information. In October 2016, a hacker gained unauthorized access to DealerBuilt’s backup database through this port, including the unencrypted personal information of more than 12 million consumers that 130 of its client dealerships had stored with the company. DealerBuilt learned about the breach in November 2016, when a dealership called, demanding to know why customer data was publicly accessible on the internet. It wasn’t until a reporter told DealerBuilt about the security vulnerability that it became aware of the open port on its storage device. The proposed order requires a senior DealerBuilt officer to provide the FTC with annual certifications of compliance; and DealerBuilt to implement specific, enforceable safeguards that address the issues alleged in the complaint (e.g., conduct yearly employee training, monitor its systems for data security incidents, implement access controls, and inventory devices on its network). It also makes significant changes to further improve the accountability of the third-party assessor responsible for reviewing DealerBuilt’s data security program. What’s more, the order gives the FTC increased access to documents and other materials upon which the assessor bases his or her conclusions.

Online Advertisers Prepare for Privacy Law Storm

A push by federal and state lawmakers to give people more control over the use and sale of their personal information could upend the way online advertisers interact with consumers. As targeted advertising becomes more prevalent and concerns grow over how companies are handling the personal data they gather, lawmakers have responded by floating a number of pieces of state and federal legislation. The National Advertising Initiative, the Association of National Advertisers and other major industry players have countered by launching the Privacy for America coalition to push for national legislation that would focus on promoting responsible data usage rather than banning certain data practices. The coalition is pushing to identify and prohibit a set of practices that are deemed “unreasonable and worthy of punishment,” such as collecting sensitive data without consent and using data to make decisions on eligibility for things like credit and employment.

State US News

Maine Passes Bill Banning ISPs from Selling Consumer Data Without Consent

Maine’s governor signed into law one of the nation’s strongest privacy bills, the Act to Protect the Privacy of Online Consumer Information, which goes into effect on July 1, 2020 and would prohibit internet service providers (ISPs) in Maine from using, selling or distributing consumer data without their consent, and from refusing to serve a customer, penalizing them or offering a discount in order to pressure consumers into allowing the ISP to sell their data. Some privacy activists have described the Maine law as even stronger than California’s because it mandates that ISPs require explicit consent from customers to sell their personal data, while the CCPA requires consumers to request that their data not be sold by their own volition. The bill was sponsored by state senator Shenna Bellows, who said she is planning to introduce an internet privacy bill in the next session that would also target tech companies.

Right to be Forgotten Requests Under the CCPA

There is a great deal of confusion regarding the requirements of the CCPA. One important question is whether a company is required to delete records that show whether an individual opted-in or -out from marketing when it receives a right to be forgotten request. The answer is generally, no. Pursuant to the CCPA, when a business receives a verified consumer request to delete personal information it generally should “delete the consumer’s personal information from its records and direct any service providers to delete the consumer’s personal information from their records.” The “right to be forgotten,” however, is not an absolute right. The CCPA includes more than nine exceptions where a business can refuse a deletion request, four of which may apply to data evidencing a consumer’s opt-in or -out preferences: internal uses of the business; complying with business obligations; uses compatible with the context of collection; and exercise or defend legal claims.

Proposed NY Privacy Bill is Broader than CCPA

The New York Privacy Act, introduced by state senator Kevin Thomas, would give NY residents more control over their data than in any other state, giving New Yorkers the right to sue companies directly over privacy violations. It would also require businesses to act as so-called “data fiduciaries,” an emerging idea in privacy circles that would legally bar businesses from using data in a way that benefits their companies to the detriment of their users. The bill is still seeking a cosponsor in the state assembly, but Thomas says he is confident that he has majority support in the senate and hopes to pass the bill this summer. The draft is already facing staunch opposition from the tech industry.

EU News

GDPR Report Card Is In

The European Commission’s Expert Group to support the application of the GDPR has delivered its ‘1st Year Report’ based on answers to 11 key questions. Here are a few highlights from the report:

  1. The GDPR requires resources that aren’t always available.
  2. Guidance needs to be better and harmonized. Lack of harmonization hurts implementation.
  3. Closure is needed on the ePrivacy Regulation.
  4. There is a desire for standard processing agreements and updated SCCs for transfers.
  5. There has been patchy implementation by organizations in areas such as information rights.
  6. Regulators are generally very good. Most report broadly positive interactions with DPAs, which are overall constructive and solution-oriented.
  7. The rewards are real. Marketers have overall positively embraced the GDPR with the view that compliance is likely to improve customer sentiment towards brands in the long term and are using it as an opportunity to make data protection a brand asset.

UK Releases Report on Adtech and Real Time Bidding

The UK data protection authority, the ICO, has investigated how the adtech sector still uses personal data for the purposes of real-time bidding in programmatic advertising. In short: legitimate interest is a goner, adtech is flouting special-category data rule, and contractual agreements are worthless. The report will be circulated to the ad tech sector, and the ICO will check that its stipulations have been followed in six months’ time. Although the ICO hasn’t made any serious threats to businesses that don’t comply, it does intend for this additional clarity on certain areas of GDPR to be adhered to. The Irish DPA is also investigating many of the same issues raised in the report.

Discussing the Right of Access for Lawyers/Law Firms

Exemptions provided in Swiss and European data protection laws allow lawyers (or the law firm as the controller of the personal data) to balance conflicting interests. In particular, the right of direct access to personal data undergoing processing may adversely affect the individual data protection rights of others, the privacy and confidentiality interests of clients as well as the confidentiality of business secrets or intellectual property of clients, attorneys or third parties. In addition, the protection of the confidentiality of the attorney–client communication (and of work products) serves the public interest in safeguarding the legal system and access to courts. Granting data subjects direct access to documents that include the personal data undergoing processing (or providing information about the relevant processing) may impair the exercise or judicial enforcement of legal claims or interfere with an effective defense of the client. The Swiss Federal Data Protection Act and the GDPR allow controllers to limit the right to receive a copy of personal data undergoing processing if and to the extent it is required to protect the rights and freedoms of others. The Swiss Criminal Code, Swiss Federal Act on the Free Movement of Lawyers, and the GDPR allow controllers to exempt information from the obligation to provide information where the personal data must remain confidential subject to a statutory obligation of professional secrecy.

EDPB Completes Guidelines on Codes of Conduct, Certification and Accreditation of Certification Bodies

The European Data Protection Board (EDPB) adopted final versions of:

  1. The Guidelines 1/2019 on codes of conduct and monitoring bodies under Regulation 2016/679. These guidelines aim to provide practical direction and explanation regarding the application of Articles 40 and 41 GDPR. They set out an established framework that explains the procedures to be followed in submitting codes of conduct for approval, and how to provide criteria for approval of such codes.
  2. Annex 2 to the Guidelines on certification criteria in accordance with Articles 42 and 43 of the Regulation 2016/679. These guidelines aim to establish the primary criteria relevant to all types of certification mechanisms issued according to Articles 42 and 43 GDPR. Annex 2 specifically identifies a non-exhaustive list of minimum requirements that the EDPB and data protection authorities will consider for the approval of certifications.
  3. The annex to the Guidelines on accreditation of certification bodies under Article 43 of the Regulation 2016/679. These guidelines assist EU member states, regulators and national accreditation bodies in implementing the provisions of Article 43 GDPR in a consistent and harmonized manner. The annex provides guidance on the additional requirements to be submitted to the EDPB for approval in case accreditation bodies are established by supervisory authorities.

ICO Admits its Own Cookie Policy is Non-Compliant

The UK’s data protection authority admitted that its current consent notice relating to the use of cookies on devices failed to meet the GDPR standard. ICO confirmed it will be making changes to its cookie policy following complaints that its site was storing data without user consent. One complaint in particular alleged the automatic placing of cookies on a user’s mobile device was in breach of the Privacy and Electronic Communications Regulations (PECR) which sits alongside the GDPR. Article 6 of PECR prohibits the storage of or access to information held on a user’s device unless explicit consent is given. “We are currently in the process of updating this to align our use of cookies to the GDPR standard of consent and we will be making amendments to this information during the week commencing 24 June.”

Other Global News

NIST Announces 800-171 Update

The National Institute of Standards and Technology (NIST) announced a long-awaited update to Special Publication (SP) 800-171 Rev. 1, Protecting Controlled Unclassified Information in Nonfederal Systems and Organizations. 800-171 Rev. 2 includes only “minor editorial changes,” including reordering the document and updating the contents of the Appendices. NIST emphasized that there are no changes to the basic or derived security requirements in Rev. 2. NIST also announced the publication of an entirely new document, SP 800-171B, Protecting Controlled Unclassified Information in Nonfederal Systems and Organizations: Enhanced Security Requirements for Critical Programs and High Value Assets, which was drafted in response to “an ongoing barrage of serious cyber attacks,” resulting in the loss and/or exposure of controlled unclassified information (CUI) that, in turn, prompted the Department of Defense (DoD) to request additional guidance from NIST. 800-171B is described as a supplement to 800-171 Rev. 2 that contains recommended enhanced security requirements designed to protect designated “high value assets” or “critical programs” that contain CUI that are of interest to advanced persistent threats. NIST is seeking public comment on the initial drafts until July 19, 2019.

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